When we learned about the recent resignation of their CEO, we knew there was trouble in the air for Barnes & Noble. Seeking Alpha has an article explaining why that is. They cite three market segments in which the bookseller is still operating: tablet market, retail business, and college bookstores. Neither of these markets appear to offer any hope.

In the tablet market, the only upside for Barnes & Noble is Microsoft's recent involvement in the Nook business:

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Maybe there's hope for the Nook, though. Last year, Microsoft (NASDAQ: MSFT) acquired a 17.6% stake in Barnes & Noble's Nook business segment. Through this investment, Microsoft breaks into the e-reading market with the goal of developing a Windows 8 operating system to replace the Google Android operating system currently running on the Nook.

As aforementioned, though, its e-book division's future does not look bright. Last fall, it reported it had 27% of the e-book market share. Just a few months later, that number fell to 25%. Because its tablet segment is downsizing, its market share will continue to fall.

Lastly, while revenues in college book sales are on the rise, earning margins have been decreasing (due to investments, they say) and might continue to do so in the long-run.

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This segment may boast increasing margins as margins on textbooks increase, but I see this practice tapering off. As textbook rental sites like Chegg further develop and refine their business, college students will seek the all-inclusive services that go beyond just the textbook.

Things certainly aren't looking good for B&N. Question is, what's really left for this company that used to be a behemoth in the book industry? Or, differently asked, does B&N even deserve to have a future?

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Somehow, the publishing world calculus has deemed Barnes & Noble an evil lesser than Amazon. And there is, perhaps, some valence to that argument. But mostly, it just shows how myopic we can be about the business we love so much.

As is so often the case, the cleverest take on the ironic saga of Barnes & Noble comes courtesy of The Onion, where a recent article reported that Fox & Company — the triumphant, megalithic bookstore from You've Got Mail — has closed in the face of "Amazon and Apple absorbing the lion’s share of the market." The article also noted, as Radosh does, that the fictional chain, like the real one that is its obvious basis, had "a cold approach to revenue." This is a satire of the truest kind.

B&N don't make it easy to like them. Over here in the UK, with the recent price slashing I treated myself to a Glowlight (wanted a light 'cos I'm waiting for cataract ops) for reading and a Simple Touch for hacking. They are both great. When the HD+ was reduced I got one so I could read magazines as PDFs in colour. And very good it is too. So then I do my usual trick and try to buy a few spare cables. The 30pin USB plug that the HD+ and HD use is hard to find in the UK. It has turned up on the B&N site as an import which from the photos seems to mean it has a US USB adaptor and the cable for £15 which is a lot when all I want is the cable. I emailed support and got no reply. The HD+ is good to use but the lack of support and shortage of basic cables is worrying. This morning I get a mailshot from nook which says "All Accessories up to 40% Off!" over a picture of HD+ cases and accessories. On investigation is is obvious that "up to 40% Off" also includes 0% off as far as the 30pin cable etc goes.

I went by a B&N this morning for the first time in several months. It really reminded me of the local independent books stores as they were losing customers to B&N back when B&N first started to take off. EBooks and Amazon are killing B&N.

There are several things off in the seeking alpha article.
Most prominently, the mischaracterization of Nook Media as a "tablet" business.
Nook media is an ebook business. Getting deep into tablets is not all that's wrong with B&N but neither does their future hinge on it.
They just need to stop trying to be Apple and start trying to be fictionwise.

B&N isn't staring at the abyss just yet.
But they can see that point from where they are.

The easiest fix is to sell Nook at a deep discount from what they could have cleared last year and focus on figuring out how to fun a pbook business now that they can't throw their weight around.

The harder fix is trying to restore Nook's credibility as a viable ebook vendor while still being a part of B&N. Trying to pin all Nook's failings on Lynch isn't going to work while Riggio is still setting policy. Firing one guy isn't going to fix their ebookstore issues, their customer service issues, or their unwarranted sense of indispensability.

B&N is facing a problem similar to that which Chapters-Indigo faced in Canada. They sold Kobo to Rakuten, and while still faced with decreasing book sales, they rejigged their product mix to include higher margin products. The result was a profitable year, despite losses in various areas.

TORONTO, May 28, 2013 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported full year gross profit $2.7 million higher than last year due to a 2.2% improvement in margin rate. The improvement in margin rate was a result of a shift in product mix to higher margin products, lower sales discounts, fewer markdowns and shipping more product through the Company's distribution center.

Net earnings from continued operations attributable to shareholders of the Company for the year were $4.3 million, compared to a net loss of $27.8 million last year. The improvement in earnings was primarily due to improved margins and no goodwill impairment charges being recognized in fiscal 2013.

Revenue for the fiscal year ended March 30, 2013 was $893 million compared to $934 million last year, a decline of 4.4%. The decline was primarily due to lower physical book and eReader sales. Additionally, the Company operated nine fewer small format stores.

The revenue decline was partially offset by double-digit growth in lifestyle, paper and toy sales and an increase in revenue from the Kobo revenue-sharing agreement due to the growth in digital reading.

BOGO (buy one, get one free sale on Nook ebooks), but.... the catch is you have to go a physical store to get the deal?! You have to choose the books at the web page, go to a store, give the cashier your email address, and then you will receive the codes for the book, to be redeemed online. What is even the point of this? Why don't they give them a physical book or a scone? At least in then going to the store would make sense. This is an example of how the needs of B&N's various divisions are in conflict.

Anyway, in this article, the author says "A deal between these companies is the only hope I see for Barnes & Noble's future." So if B&N doesn't make a deal with Microsoft (which is very busy dealing with a restructuring) they're doomed? I don't really see how, even if B&N was bought out by Microsoft, this would help anyone but the investors. B&N might receive a temporary shot of cash, but it wouldn't resolve their main problem, and why would MS want Nook anyway? I never understood that.

I didn't bother to renew my B&N "membership" (can't remember what they call it) a year after I purchased my first Nook, because it couldn't be used for discounts on ebooks. It was worthwhile for getting a discount on the Nook itself, which is why I originally signed up, and my when we were homeschooling my daughter liked physical books, so that was handy - but as a college student, she's an ebook convert as well (and she chose a Kindle). When I do go into a B&N, I seldom find what I'm looking for. I get emails from B&N constantly, offering me discounts - but they are NEVER applicable to ebooks. When I got to their site looking for a specific book, they're less likely to have it than Amazon is. So I'm less likely to even check them any more, honestly - when I use my Nook I generally read something I've converted to epub using Calibre.

When my first Nook wore out, I did buy GlowTouch, because I got a good deal on it. I'm sorry now that I didn't just go ahead and get a Kindle.

I didn't bother to renew my B&N "membership" (can't remember what they call it) a year after I purchased my first Nook, because it couldn't be used for discounts on ebooks. It was worthwhile for getting a discount on the Nook itself, which is why I originally signed up, and my when we were homeschooling my daughter liked physical books, so that was handy - but as a college student, she's an ebook convert as well (and she chose a Kindle). When I do go into a B&N, I seldom find what I'm looking for. I get emails from B&N constantly, offering me discounts - but they are NEVER applicable to ebooks. When I got to their site looking for a specific book, they're less likely to have it than Amazon is. So I'm less likely to even check them any more, honestly - when I use my Nook I generally read something I've converted to epub using Calibre.

When my first Nook wore out, I did buy GlowTouch, because I got a good deal on it. I'm sorry now that I didn't just go ahead and get a Kindle.

My wife renewed her membership (whatever it's called). We save 10% on cheesecake in the Cafe. We do that a couple of times a month, and it pays for itself in a year. The additional 20% off coupons that show up once a month or so allows us to get something from them for almost what amazon has it for (assuming it is not a current top seller).

I get emails from B&N constantly, offering me discounts - but they are NEVER applicable to ebooks.

The emails they send me are always solely ebooks, e-newspaper subs, e-mags, e-other stuff, and a few overpriced covers. I wonder if they base it on your home country? There isn't much chance for me to pop into my local B&N.

Lynch certainly screwed up with the tablets (which in themselves are not so bad) and put the company in a bad position, but Riggio bringing in bean counters who only udnerstand the physical side to run everything is exactly the wrong thing to do. Whether B&B does the electronics themselves or through a deal with someone else, they need to have a robust digital presence that integrates with their stores or they'll just keep circling the drain.

The local B&N where I am appears to be a pretty busy place, a center of community activity, but I hadn't gone in there for quite a long time before I went in 2 1/2 years ago to buy a Nook Classic (which I still use) and hadn't been in there much since then until I went in recently to buy an HD+. In other words, Lynch made me a customer, and if they don't work things out on the digital side they will lose me as a customer.

I'm a book lover and avid reader with too many paper books and not enough space to keep them, so it's not that I avoid B&N or any other brick and mortar bookstore. It's just that digital is more convenient and manageable at this point, and usually the occasional paper purchase can be handled just as well (or better) online through (gasp) Amazon or a used seller like Abebooks (which I think is actually owned by the Amazon octopus anyway), though since I bought the Nooks I have bought at least two books (gifts) in the local store. It's too bad about B&N, and I hope I don't end up with two marginal devices as the company continues to unwind.

The reason that I went to the B&N yesterday was to buy my sister a nook HD+ with 32G for her birthday. I warned her that B&N was getting out the Nook business, but she prefers the nook to the kindle or iPad.

I had the member card for years and it certainly paid for itself over the years. I stopped renewing it a couple of years ago. For a while, I would go to B&N to see what new books were in (one of my biggest gripe about ebook stores is how hard it is to wade through what new books have come in since the last time I checked. It really shouldn't be that hard), look for books that aren't in ebook format (mostly history) and check the blu-ray DVD's. Heck, I even made the effort of checking the B&N ebook store first if I saw a book that I wanted. Unfortunately, at the time, the B&N ebook store rarely had the book, while Amazon did. The bottom line is that content is king.

Personally, it was the switch to higher margin products and less in store books that got me to stop going to the B&N on a regular basis. When their history selection got cut to a quarter of what they use to carry, it just wasn't worth bothering with anymore.

Lynch certainly screwed up with the tablets (which in themselves are not so bad) and put the company in a bad position, but Riggio bringing in bean counters who only udnerstand the physical side to run everything is exactly the wrong thing to do. Whether B&B does the electronics themselves or through a deal with someone else, they need to have a robust digital presence that integrates with their stores or they'll just keep circling the drain.

I think it shows a fundamental misunderstanding of business to complain of Riggio bringing in "bean counters". This chart shows the problem pretty clearly; Nook was losing half a billion dollars. On sales of $775m.

Clearly, they needed some bean counters, in about the same way that someone with a knife in their stomach needs a doctor.

Of course they also need a digital strategy. But not *this* digital strategy; it's a disaster. Probably they should focus on e-readers and their e-bookstore and stop trying to compete with Apple and Google in the tablet space.*

They should also try to make better use of their pbookstores and stop being afraid of cannibalizing their own sales. Worries about cannibalizing their own sales are, I think, why so many of their pbook/e-book crossover plans have been so lame.** What if you could go to a B&N store and, while browsing, buy a book you see on your nook (or on your phone with the nook app) quickly and easily, without having to go through the checkout line? Maybe you could tap the book with your device and purchase it that way. Or maybe there is some sort of numerical code that you could quickly enter (maybe from the front page) to purchase the book. Whatever they do, the key is to make it genuinely simple and convenient. Almost as if you cared about giving the customer a genuinely good experience.

(And not to worry about a future in which the bookstore is filled with Nook users who just use the store for showrooming and never buy a pbook: the alternative to this future isn't everyone buying pbooks; the alternative is everyone staying at home and buying from Amazon.)

*The jury is still out on whether this is a good approach for Amazon. Although Amazon does have a significant music and video presence, which B&N does not.

*The jury is still out on whether this is a good approach for Amazon. Although Amazon does have a significant music and video presence, which B&N does not.

Amazon also uses the FIRE as a "trojan horse" storefront for the rest of their retail business; it's not just about books or content. FIRE owners tend to be PRIME customers and PRIME customers are frequent buyers at Amazon and spend significantly more than non-PRIME customers. (No shock, of course.)

One recent quote at Bloomberg's claimed that 25% of FIRE owners hadn't read a single book on the FIRE in the last year. Which means 75% has.

It's too early to say FIRE is or isn't a good move for Amazon but so far it looks to be a(t least a small) net plus.

B&N's digital strategy was going fine until 2011, when it was all about ebooks and magazines. That is their core business and they need to focus on that. They're not Amazon and they're not Apple and they never should've tried to be them.